Jardine cannibalisation 2

Cannibalisation continues.

This year, JMH just invested another approximate SGD300M buying up Jardine C & C shares after announced that it has acquired a 5% interest in Mandarin Oriental in Q1. Currently, JMH effective interests in HKL, Jardine C&C, MOIL and DFI are about 53%, 80%, 85% and 78% respectively. Effective interests in the same companies were 43%, 64%, 66% and 66% respectively in 2019. If we go back much earlier, in 2005, effective interests in same companies were 35%, 50%, 59% and 62% respectively.

JMH has been eating up it listed subsidiaries and I left out JSH but the buyout of 15% JSH was it biggest for the last 20 ++ years @ about USD5.5B at a very sensible price. You can talk about control and empire building all you want but the matter of fact is JMH already has control in these companies, money spent buying up additional interests in existing companies has only one reason which is getting additional economic benefits and the only question is whether JMH has been paying at least a reasonable price or better still sensible price. Since the share prices of these group of Jardine companies have been disappointing since early 2010s, it is not easy to pay an unreasonable price.

Just look at DFI which was doing badly in recent years but it was rocketing before that and the share price did the same and JMH did not buy any interest in size since 2005, the increase in effective interest was mainly resulted from scripts taking at JSH level and the acquisition of 15% interest @ USD5.5B. But on the other hand, over the years, JMH has been buying Jardine C & C and there is only 20% left to buy.

Buying the remaining 20% at current price is about SGD2 billion. A big sum considered JMH market capitalisation of USD11 billion but not something JMH is incapable of considering JMH cashflow. And it makes strategic sense to take Jardine C&C private. Jardine C&C without its investment doesn’t has huge operation. JMH SEA arm doesn’t need to be listed and Jardine C&C is currently the roadblock on the highway for capital flow, blocking capital from non Jardine C & C subsidiaries flowing toward attractive destinations.  It will be like another JSH buyout at a sensible price. Current price looks great. Astra effective interest will jump from 39% to 50% if it happened. Let not forget about the other 5 sizable investments in Indonesia, Thailand and Vietnam.

 Exclude what the subsidiaries are investing in their businesses, the story of the day is JMH is not just buying back its own shares which is cheap, but also deploying capital toward adding on to its existing investments which JMH has not been shy to do so and also making new investment. A sound approach toward investment. The only question left is whether JMH, lead by accountants, is good at allocating capital.